Types

• Early distribution rules often depend on the type of IRA you have. Roth IRAs allow you to withdraw contributions--as opposed to account earnings--for any reason without tax or penalty as long as the account has been open for five years. If you have a traditional IRA, distributions that don't qualify for exceptions are subject to a 10-percent penalty, regardless of how long you've had the account. SIMPLE IRAs work much like traditional IRAs, with one exception: unqualified distributions taken from an account open less than two years are subject to a hefty 25-percent penalty.
  
  

Traditional and SIMPLE IRA Penalty Exceptions

• Both Traditional and SIMPLE IRAs let you withdraw money before you are 59 1/2 to cover certain education expenses for yourself or someone in your immediate family. You can also withdraw up to $10,000 to make a down payment on your first home, as long as you do so within 120 days of receiving the money. Though you'll avoid the 10-percent penalty in both scenarios, you're still required to pay income taxes on the distribution.
  
  

IRA Hardship Exceptions

• There are also penalty exceptions that can help you through a medical or financial emergency. For instance, if you incur large, unreimbursed medical bills that exceed 7.5 percent of your income, you can withdraw from your Roth, traditional or SIMPLE IRA without penalty to pay them off. If you are laid off for more than 12 consecutive weeks, you can use IRA funds to pay health insurance premiums for you, your immediate family and your dependents. The money is also available to your family should you die or become disabled. You will still have to pay any income tax that is due on the withdrawals, though.
  
  

Required Minimum Distributions

• If you reach the age of 70 1/2 and have not yet begun taking money from your traditional or SIMPLE IRA, the IRS mandates that you begin taking required minimum distributions (RMDs). RMDs are calculated based on your life expectancy at the point you turn 70 1/2 and the amount your traditional or SIMPLE IRAs are worth. Roth IRAs do not require you to take distributions in your lifetime--you can pass the account on, untouched, to your beneficiaries. However, those who inherit IRAs, whether Roth, traditional or SIMPLE, must take RMDs based on their life expectancy.
  
  

Early Roth IRA Distributions

• The rules for taking unqualified distributions from a Roth IRA account are complicated. The IRS mandates the order in which the monies can be withdrawn: first come the contributions you made to the account; next, any funds you rolled over from a traditional IRA on a first-in-first-out basis; finally, you may withdraw your account earnings. You can take distributions without tax or penalty, and avoid the penalty on traditional IRA rollovers and earnings, if you qualify for an exception.